This Budget is a clear victory for Australia's 1%

 

John Quiggin theguardian.com, Wednesday 14 May 2014

No progress on tax avoidance, no sign that Australia will responsibly lead the G20, no reform of expensive concessions to the wealthy: this Budget is a massive moral failure

'None of the obvious targets – superannuation concessions, negative gearing and the associated concessional treatment of capital gains, diesel fuel rebates and so on – have been touched.' Photograph: Mike Bowers, Guardian Australia

Most of the analysis of last night's Budget focuses on the impact on middle-income and lower-income Australians. This is natural enough – most of the cuts announced will fall on these groups and they are the ones whose reaction will decide the government’s fate (one welcome change from the recent past is the disappearance of the idea that all such people live in western Sydney).

By contrast with the plethora of announcements directed at middle and lower-income groups, some of those most affected by the government’s fiscal policy choices received less attention. First, there are the global poor, sometimes referred to as the "bottom billion", people living on the unimaginable sum of one or two dollars a day. Then there are those at the top, the now famous “1%”, whose growing share of income and wealth has been documented most recently in Thomas’ Piketty’s Capital in the 21st Century.

The bottom billion have, predictably, got the shaft. The Abbott government has cut $7.5bn from foreign aid, the biggest single saving in the budget. Moreover, aid is being directed away from poverty reduction and towards the more self-interested pursuit of Australian foreign policy goals.

This is a massive moral failure on the part of the government but it has calculated, probably correctly, that Australian voters will not notice cuts that fall on people most of whom we will never meet or hear from. Still, in combination with its policies on refugees, climate change and human rights, the cuts will help to cement Australia’s new image as a global bad actor.

This has already helped to undermine our leadership of the G20. Many participants are saying privately that they are just waiting until Australia’s turn is over to get the organisation moving again. Talking of the G20, it’s noticeable that the target of raising the growth rate by two percentage points over the next five years, announced with some fanfare in February, wasn’t even mentioned in the Budget Papers, which projected continued weakness in the international economy.

Of course, the slowdown in growth won’t do much to dent the steadily growing wealth of the 1%, and neither will the Budget. As usual, the influence of the wealthy on the framing of the Budget is reflected more in what isn’t there.

None of the obvious targets – superannuation concessions, negative gearing and the associated concessional treatment of capital gains, diesel fuel rebates and so on – have been touched. All of these measures are expensive and distorting to the Australian economy. Our system of tax concessions rewards speculation, in everything from housing to coal tenements to gaming licenses, a fact that can be easily verified by looking at the various "rich lists", and the way in which those riches were acquired.

The only contribution to be made by the wealthy to fixing the spurious Budget emergency is an increase in the top marginal rate of taxation, billed as a "temporary debt reduction levy", which is supposed to be maintained for four years and to raise $3.1bn.

But in one of the few pieces of political cleverness this government has been displayed, the proposal has been put forward in such a way that both Labor and the Greens have announced they will oppose it, as of course will Clive Palmer, the dominant player in the new Senate.

Christine Milne’s decision to play politics on this measure is a disaster for the Greens, reducing them to the same level as the major parties. The lameness of the excuses she has put forward is indicative of the political cowardice at work here.

The most substantive objection is that the levy is only supposed to be temporary, but since it will outlive the current parliament, that is scarcely a major concern. When paired with the (correct) decision to support a return to indexation of fuel exercise, this decision will play into the worst stereotype of the Greens as focused on the interests of well-off inner-city dwellers.

Also notable for its absence in the treasurer’s speech is any mention of tax avoidance. The G20 is grinding away on issues like transfer pricing with very little in the way of public Australian leadership, while most of the real work is being done elsewhere in the OECD. Meanwhile, the Abbott government is actively promoting avoidance, most notably through the reintroduction of FBT rorts for cars.

Overall, the 1% can count themselves well pleased with this Budget. Not only has all the pain been directed elsewhere, but Labor and the Greens have been complicit in the process. The fact that our structural problems can only be addressed if the 1% contribute more and receive less from the government has been ignored yet again.

 

This Budget is a clear victory for Australia's 1% | John Quiggin | Comment is free | theguardian.com